Relief to Zydus Head Diabetologist: ITAT quashes Revision u/s 263 on Income Tax Deduction for Political Donation, says AO Conducted Due Enquiry [Read Order]
The PCIT had concluded that the assessment order was erroneous and prejudicial to revenue interest, and directed a fresh assessment.
The Income Tax Appellate Tribunal ( ITAT ), Ahmedabad Bench, has quashed the revisionary order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961.
The Tribunal held that the Assessing Officer (AO), having conducted due enquiries into the claim of deduction under section 80GGC for donations made to a political party, had taken a plausible view and the PCIT could not substitute his own opinion in revision.
The assessee, Vitthaldas Nathubhai Shah, filed his return of income for AY 2020–21 declaring income of ₹1.01 crore. The case was selected for limited scrutiny to verify deductions claimed under Chapter VI-A. The AO issued notice under section 142(1) calling for detailed break-up and evidence.
The assessee had furnished audited accounts, computation of income, bank statements, and receipts for donations, including ₹15 lakh to the “Kisan Party of India,” claimed as deduction under section 80GGC. After verification, the AO accepted the claim and completed assessment under Section 143(3) read with section 144B.
Later, the PCIT invoked section 263, holding that the AO had failed to make “proper and meaningful enquiry” regarding the genuineness of the ₹15 lakh donation. He relied on search findings against the Kisan Party of India, which allegedly ran a bogus donation racket. The PCIT concluded that the assessment order was erroneous and prejudicial to revenue interest, and directed a fresh assessment.
The assessee argued that the AO had issued specific queries and examined evidence, including donation receipts and bank statements. Once a plausible view had been taken after enquiry, revision under section 263 was impermissible. Reliance was placed on Supreme Court and Gujarat High Court rulings, including Malabar Industrial Co. Ltd. v. CIT and CIT v. Arvind Jewellers, which mandate that both error and prejudice must co-exist for revision.
It was contended that the PCIT relied only on general search findings and audit objections, without bringing any incriminating material linking the assessee’s donation to bogus transactions.
The Departmental Representative defended the PCIT’s order, stressing that search findings showed the political party engaged in a bogus donation racket. It was submitted that the AO’s order was cryptic and non-speaking, showing non-application of mind, justifying revision under section 263 of the Income Tax Act.
The Tribunal held that the AO had issued detailed notice, obtained replies, and verified supporting documents before accepting the claim under section 80GGC. Importantly, no specific material from the search connected the assessee’s donation to the alleged racket. The Tribunal distinguished cases cited by the PCIT, noting that in those matters, incriminating material or anomalies in donation records existed, unlike the present case.
The Bench reiterated that revisionary powers under section 263 can be exercised only in cases of “lack of enquiry” and not “inadequate enquiry.” Since the AO had made enquiries and taken a plausible view, the PCIT’s action amounted to mere substitution of opinion.
The Tribunal thus quashed the PCIT’s order, holding that the assessment was neither erroneous nor prejudicial to the interests of the Revenue. The assessee’s appeal was allowed.
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